The NFL’s Super Bowl Con: Hosting the Big Game Isn’t an Economic Score For Cities
In their efforts to woo the NFL to the New Meadowlands Stadium, team owners and local officials from New York and New Jersey have thrown around some pretty big numbers. But is America’s biggest sporting event—and in 2014 at $70 million, the most expensive Super Bowl ever played—really such a score for local economies or just a big NFL con?
Turns out, according to economists who study the impact of the mega games, no one can know in advance how much money will be brought in from the first dome-less, cold-weather Super Bowl. But that won’t stop prognosticators—especially those with skin in the game—from coming up with figures.
John Mara, President and CEO of the New York Giants, promised in the bid presentation that the game would be a win-win-win situation, benefiting both states and the city of New York by “pumping hundreds of millions of dollars into the local economies.”
He’s citing the economic impact estimate provided by the Sports Management Research Institute, which projects a $594 million financial injection into the local economies—though most of the money will be headed towards New York, according to reporting on the unreleased estimate by The Daily News.
Nearly $600 million—even in a region with an annual GDP of over $1 trillion—is enough to make even the sports unenthusiasts among us ready for some football. But, if past projections are any indicator, it’s also probably grossly inaccurate. “The evidence we’ve compiled would suggest that it’s far, far from that kind of number,” says economics professor Robert Baade of Lake Forest College.
One study on the subject (PDF) found that the Super Bowl contributes only one-quarter of what the NFL promises. And in fact, even though most do provide an accounting return (money taken in covers or exceeds amount spent) almost all result in a negligible or negative overall impact on the economy.
According to Baade, boosters and special interest groups who stand to gain from public support for the event almost always inflate their estimates. “Of course they’re going to paint a very rosy picture,” he says.
Though the NY/NJ estimate authored by the Sports Management Research Institute (SMRI) has not and will not be released—a host committee spokesperson told The Wall Street Journal in 2010, “If we release the report, everybody is debating one number vs. another number.” A 2007 estimate by the group acknowledged a simple methodology: “We track whatever was spent by the Super Bowl fan. Period,” SMRI president Kathleen Davis told Politifact.
This prospective analysis makes assumptions about how many people will be in town and how much they’ll spend, and voila, $600 million.
But economists tell The Daily Beast that these swollen appraisals from SMRI and others miss a few important points and that moving their estimates’ decimal point one place to the left would provide a more accurate number. Baade guesses this year’s Super Bowl will pull in somewhere closer to between $30 million and $90 million.
These groups are “very good at adding and multiplying, but not so good at subtracting,” says Victor Matheson, an economist at College of the Holy Cross who studies the impact of big sporting events.
First, Matheson explains, there’s crowding out. This takes into account the people who will be skipping their annual Phantom of the Opera holiday to steer clear of a hundred thousand football fans in Times Square (renamed “Super Bowl Boulevard” for the occasion). Matheson recounted that Broadway attendance fell 20 percent when the Republican National Convention was held in New York in 2004. And it’s not just folks that want to miss the rowdy crowd. People are also wise to the price hikes that tend to accompany big-name events.
Then there’s the substitution effect. Almost two-thirds of the 400,000 Super Bowl revelers are expected to come from within the region. Many of these people would have likely been participating in some other activity that impacted the local economy. Should the final tally include a family who pays $5 each to slide down the NFL’s 58-foot-high toboggan instead of going to see a movie at a local theater? Will a New Yorker who eats a pile of chicken wings do so regardless of where the Super Bowl takes place?
Finally, any true measure of economic impact has to take into account something economists call leakage—an effect that occurs when money spent in the region leaves the local economy. For instance, Matheson explains, though New York hotels will be jam-packed at double the usual rate, the increase in profits will be celebrated by corporate headquarters; the money doesn’t trickle down to desk clerks and housekeeping staffs—already some of the lowest-paid workers in any business sector.
Still, New York does have some advantages over other cities that might give it a better chance of being in the black at the end of it all. Its sheer size could make the crowding effect less noticeable than in a smaller city. The game is also less likely to push out visitors as its slow season for the city—February is the second slowest month for tourism in terms of hotel occupancy, according to NYC’s tourism board.
Additionally, the $1.6 billion Meadowlands stadium is one of the few built with private funds, so the touchy subject of taxpayers funding the fields won’t be factored in.
But the real litmus test might not even be whether at the end of it all the Super Bowl coffers are full or empty, but what economists call an economic rate of return, which basically answers the question, “Is this the best use of state and city resources?”
When economists talk about worth, they’re talking about opportunity cost. Providing security and space, cleanup, etc., not only at the stadium but at two dozen other events in Brooklyn and Manhattan will be costly. What’s the difference between accommodating the Super Bowl and using these funds to build schools, or expand the subway system or putting the money in 10-year treasuries?
An economic rate of return of more than zero means you’ve covered all costs and generated a return greater than “the next best alternative use of those funds.”
Typically, according to Baade’s research (PDF) and supported by related studies, Super Bowl host cities see a negative rate of return. “If you do a pure economic evaluation, we may be able to cover the explicit costs…but we can’t make the argument that accommodating the Super Bowl is actually better than anything else.” Baade says.
So, there’s no economically sound way to predict a Super Bowl’s impact before the event and those that try have been proven wrong again and again. But don’t expect that to stop the cheering from the few with the most to gain. When asked for a more detailed analysis of Super Bowl XLVIII, the host committee demurred, but assured in a statement, “Super Bowl XLVIII is expected to be an economic boom [sic] for the region.”
Economists aren’t convinced.
“Let’s count the beans at the end of the day and find out if anything is significantly different,” Baade says.